Question $1(25$ pts$)\_$NPV Valuation: The CR Corporation wants to set up a private cemetery business. According to the CFO, business is "looking up$".$ As a result, the cemetery project will provide a net cash inflow of $$60,000$ for the firm during the first year and the cash flows are projected to grow at a rate of $6\%$ forever. The project requires an initial investment of $$925,000.$

a$).$ If CR Corp. requires a $13$ percent return on such undertakings, should the cemetery business be started?

b$).$ The company is somewhat unsure about the assumption of $6\%$ growth rate in its cash flows. At what constant growth rate would the company just break even, if it still required a $13$ percent return on investment?

Question $2(25$ pts$)\_$NPV and IRR: AHC International is evaluating a project in Peru. The project will generate the following cash flows:

$\backslash$table$[[$Year$,$Cash Flow$],[0,-450000],[1,165000],[2,190000],[3,205000],[4,183000]]$

In an attempt to improve its economy, Peru's government has declared that all cash flows created by a foreign company are "blocked" and must be reinvested with the government for $1$ year. The reinvestment rate for these funds is $4\%.$ If AHC uses an $11$ percent required return on this project, what are the NPV and the IRR of this project? $($Note: you have to bring cash back to time zero from the time they are available and with the exact amounts$).$

Question $3(25$ pts$)$ Expected Return: You want to find the expected return for Tesla Inc. using the CAPM. First, you need the market risk premium. Use the Canada $3-$month Treasury Bill Yield of $4\mathrm{.}99\%.$ as a proxy for the risk$-$free rate $($remember$,$ T$-$Bills are a very short term government bonds$).$ Use the average common stock return in Table $12\mathrm{.}3$ in your book $($page $442)$ to calculate the market risk premium. Next, on the

www$.$finance.yahoo.com site enter the ticker symbol TSLA for Tesla, and find the beta for this firm. What is the expected return for Tesla Inc., using CAPM? What assumptions have you made to arrive at this number?

Question $4(25$ pts$).$ A $$2,000$ portfolio is invested in three stocks and one risk$-$free asset. Five hundred dollars is invested in stock A which has a beta of $1\mathrm{.}3.$ Six hundred dollars is invested in Stock B which has a beta of $\mathrm{.}80.$ The rest of the portfolio is divided evenly between stock $C$ and the risk$-$free asset. What is the beta of stock $C$ if the portfolio is equally as risky as the market?